Microfinance fits all three of these new global trends in the financial arena. As a consequence, the past few years have witnessed the emergence of new microfinance investment vehicles attracting SRI and capital market money. In return, they are bringing yet more professional skills into the industry, increasingly commercializing and rationalizing the value chain, pressuring investment intermediaries into further transparency, risk management tools and competitive market pricing.
The micro- and small enterprise segments of the markets often remain in low correlation with macro- and global economic indicators. Throughout the Ecuador financial crisis that brought much of its banking sector to bankruptcy and ended with the replacement of the local Sucre for the U.S. Dollar, the largest microfinance institution, Banco Solidario, just as the smaller rural cooperatives active with micro-enterpreneurs, have seen their bad loan portfolio remain steady and controlled to the contrary of the banking sector.
Source: Ecuador banking authorities
The Dexia Micro-Credit Fund (DMCF) and the responsAbility Global Microfinance Fund (RGMF) are the two largest microfinance investment vehicles available to Swiss investors. Both have a close to nil monthly volatility and offer steady absolute returns to their investors. Source: Bloomberg
microfinance funds & investment vehicles
Over fifty global and regional microfinance investment vehicles exist today, and at least as much local ones have been identified. All are expected to grown significantly in the coming few years. Foreign investment in microfinance totals over a billion dollars, and is growing rapidly (supply is expected to double in 2005 and double again by 2008). These funds are today mostly set for average foreign investments of ess than a million U.S. dollars in short term hard currency debt. They have also in the past five years targeted largely the same few dozen institutions, monopolizing much of the attention in the industry. Current policy makers are thus increasingly pressuring investment intermediaries to broaden the scope and geographical outreach of investment products and match adequately the large inflow of funds with the large market demand.
source: Symbiotics SA Information, Consulting & Services